DEFENSE HEALTH 

CARE

More-Specific 

Guidance Needed for 

TRICARE’s Managed 

Care Support 

Contractor Transitions

Report to Congressional Requesters

June 2014

GAO-14-505

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-505, a report to 

congressional requesters

June 2014

DEFENSE HEALTH CARE

More-Specific Guidance Needed for TRICARE’s 

Managed Care Support Contractor Transitions

Why GAO Did This Study

DOD provides health care through 

TRICARE, its regionally structured 

health care program. In each of its 

regions (North, South, West), DOD 

uses contractors to manage health 

care delivery through civilian providers, 

among other tasks. UnitedHealth—an 

organization new to TRICARE—was 

awarded the contract in the West 

region. After health care delivery 

began, UnitedHealth experienced 

problems fulfilling some requirements 

and delivering care to TRICARE 

beneficiaries.

GAO was asked to review the West 

region’s transition to UnitedHealth. 

This report provides information on 

(1) the extent to which TMA provided 

guidance and oversight of the new 

contractor’s transition period in 

preparation for health care delivery; 

and (2) how, if at all, TMA’s guidance 

and oversight during the transition 

period contributed to issues with health 

care delivery. GAO reviewed and 

analyzed TMA guidance, contract 

requirements, and other relevant 

documentation, and interviewed TMA 

and UnitedHealth officials.

What GAO Recommends

GAO recommends that DOD review 

and revise as necessary, its transition 

guidance to strengthen its oversight 

and ensure that future managed care 

support contractors have sufficient 

information to successfully complete 

transition requirements. DOD 

concurred or partially concurred with 

GAO’s recommendations, but 

disagreed with some of GAO’s 

findings. GAO maintains that the 

information presented is accurate, and 

recommendations valid as discussed in 

the report. 

What GAO Found

The recent transition of TRICARE’s managed care support contractors 

(contractors) in the West region did not go smoothly and highlighted numerous 

deficiencies in guidance and oversight by the TRICARE Management Activity 

(TMA)—the Department of Defense’s (DOD) office responsible for awarding and 

managing these contracts at the time of GAO’s review. For example, TMA did not 

ensure that its outgoing and incoming contractors used the same version of 

transition guidance, resulting in problems that were left largely to the contractors 

to resolve. Additionally, TMA’s guidance lacked sufficient specificity for some 

requirements, such as the development of a referral management system that 

could interface with the referral systems used by the regions’ military treatment 

facilities—a system that was also not tested prior to health care delivery, unlike 

other critical system interfaces. In addition, TMA lacked a process for holding the 

contractor accountable when transition requirements were delayed or not met. 

TMA officials explained that the regional contracts are performance-based, 

meaning that most—but not all—of the contract requirements include an 

expected outcome, but the manner in which that outcome is to be achieved is left 

to the contractor. As a result, TMA officials stated that, regardless of their 

concerns, it was difficult to hold UnitedHealthcare Military & Veterans Services 

(UnitedHealth) accountable until the requirement was actually missed. However, 

as GAO has previously reported, important attributes of a performance-based 

contract include features that allow for the evaluation of a contractor’s 

performance. UnitedHealth’s contract contained these features, and as a result, 

GAO believes that this performance-based contract structure did not diminish 

TMA’s responsibility for providing sufficient oversight to ensure that the 

contractor was performing as required.

TMA’s inadequate guidance and insufficient oversight contributed to problems 

with health care delivery. UnitedHealth experienced difficulty in meeting some of 

its requirements early on, disrupting continuity of care for some beneficiaries and 

potentially resulting in unnecessary costs. For example, the lack of guidance on 

developing a referral management interface contributed to problems with the 

processing of specialty care referrals. Consequently, the requirement for 

beneficiaries to obtain a referral authorization for specialty care was temporarily 

waived—a move that the Army estimated could cost DOD over a million dollars 

as beneficiaries may have obtained more specialty care from civilian providers 

than from military treatment facilities. Further, insufficient oversight related to 

UnitedHealth’s determination of the number of staff needed to man its call center 

contributed to a delayed resolution in meeting telephone response time 

requirements. As a result, it was not until the third month of health care delivery 

that UnitedHealth was able to meet its requirement to answer 90 percent of calls 

within 30 seconds. These and other problems ultimately resulted in TMA holding 

the contractor accountable through the use of corrective action requests and 

financial penalties.

View GAO-14-505. For more information, 

contact Debra Draper at (202) 512-7114 or 

draperd@gao.gov.
Page i GAO-14-505 TRICARE Contractor Transition

Letter 1 

Background 5

TMA’s Guidance on Contract Transitions Was Inadequate, and Its 

Oversight Was Insufficient 9

Inadequate Guidance and Insufficient Oversight during the 

Contractor Transition Contributed to Health Care Delivery 

Problems, but Ultimately Led to Greater Oversight 17

Conclusions 22

Recommendations for Executive Action 23

Agency Comments 24

Appendix I UnitedHealth’s Education and Outreach Efforts during Transition 

and the First 6 Months of Health Care Delivery 30

Appendix II Comments from the Department of Defense 32

Appendix III GAO Contact and Staff Acknowledgments 38

Tables

Table 1: The Seven Key Focus Areas for TRICARE Managed 

Care Support Contract Transitions 8

Table 2: Number of Beneficiary Briefings and Attendees from 

February 2013 through September 2013 30

Table 3: Number of Provider Briefings and Attendees from 

February 2013 through September 2013 31

Figure

Figure 1: Timeline of Events for the Award of TRICARE’s ThirdGeneration Managed Care Support Contract for the West 

Region 6

Contents
Page ii GAO-14-505 TRICARE Contractor Transition

Abbreviations

DHA Defense Health Agency

DOD Department of Defense

MTF military treatment facility

TMA TRICARE Management Activity

TRO TRICARE Regional Office

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Page 1 GAO-14-505 TRICARE Contractor Transition

441 G St. N.W.

Washington, DC 20548

June 18, 2014

The Honorable Patty Murray

Chairman

Committee on Budget

United States Senate

The Honorable Mark Begich

United States Senate

In fiscal year 2013, the Department of Defense (DOD) offered health care 

services to almost 9.6 million eligible beneficiaries in the United States 

and abroad through TRICARE, its regionally structured health care 

program.1 Under TRICARE, beneficiaries can obtain health care through 

DOD’s direct care system of military hospitals and clinics, referred to as 

military treatment facilities (MTF), or through its purchased care system of 

civilian providers. DOD contracts with private sector companies—referred 

to as managed care support contractors (contractors)—to develop and 

maintain civilian provider networks and provide other services, such as 

specialty care referrals, enrollment, medical case management, claims 

processing, and customer service.2

Each TRICARE region in the United States (North, South, and West) has 

a TRICARE Regional Office (TRO) that helps oversee the contractors’ 

performance, including monitoring network quality and adequacy, and 

customer-satisfaction outcomes. On October 1, 2013, DOD’s Defense 

Health Agency (DHA) became responsible for acquiring, administering, 

and overseeing TRICARE’s managed care support contracts—

 

1

Generally, eligible beneficiaries include active duty personnel and their dependents, 

medically eligible National Guard and Reserve servicemembers and their dependents, 

and retirees and their dependents and survivors. Active duty personnel include Reserve 

component members on active duty for at least 30 days.

2

DOD awarded one managed care support contract for the TRICARE program in each of 

its three U.S. regions.
 

Page 2 GAO-14-505 TRICARE Contractor Transition

responsibilities formerly handled by the TRICARE Management Activity 

(TMA).3

Under the current, third generation of managed care support contracts, 

health care delivery was scheduled to begin nationwide on April 1, 2010.4

However, due to sustained bid protests for each of the contracts and 

TMA’s implementation of related corrective actions, health care delivery 

started at different times in each of the TRICARE regions.5 TRICARE’s 

West region was the last of the three regions to transition to the third 

generation of managed care support contracts with a health care delivery 

start date of April 1, 2013.6 Unlike the North and South regions, which 

were awarded to incumbent contractors, the West region was awarded to 

UnitedHealthcare Military & Veterans Services (UnitedHealth)—an 

organization that was new to TRICARE.7

 

3

Prior to October 1, 2013, TMA oversaw the TRICARE program. In response to increasing 

pressure on its budgetary resources, DOD established the DHA on October 1, 2013, to 

assume management responsibility of numerous functions of its medical health system, 

including the former TMA, which was eliminated on that date. For additional information 

about the establishment of DHA, see GAO, Defense Health Care Reform: Additional 

Implementation Details Would Increase Transparency of DOD’s Plans and Enhance 

Accountability,

Additionally, this was the first 

transition to a nonincumbent contractor since the start of the TRICARE 

program. After health care delivery began, UnitedHealth experienced a 

GAO-14-49 (Washington, D.C.: Nov. 6, 2013).

4

TRICARE’s first- and second- generation managed care support contracts were awarded 

in 1996/1997 and 2003, respectively.

5

A bid protest is a challenge to the award or proposed award of a contract for procurement 

of goods and services or a challenge to the terms of a solicitation for such a contract. An 

offeror—a competitor for a government contract—who was not awarded a contract may 

challenge a federal agency’s award or proposed award of a contract based on an alleged 

violation of statute or regulation. Such a challenge, known as a “post-award bid protest,” 

may be filed with the contracting agency (referred to as an agency-level protest), the U.S. 

Court of Federal Claims, or GAO. GAO’s bid protest function—in contrast to its audit 

function—is an adjudicative process that is carried out by attorneys in GAO’s Procurement 

Law group, who prepare bid protest decisions resolving disputes concerning the awards of 

federal contracts.

6

The managed care support contract’s health care delivery date in the North region was 

April 1, 2011, and in the South region it was April 1, 2012.

7

UnitedHealth is a subsidiary of the UnitedHealthcare Group. According to its website, the 

UnitedHealthcare Group is a diversified insurance company that has several lines of 

business, including private health insurance. Prior to competing for the third generation of 

managed care support contracts, UnitedHealth had no previous experience as a managed 

care support contractor.
 

Page 3 GAO-14-505 TRICARE Contractor Transition

number of well-publicized problems, reported by DOD and the media, 

performing certain required services for TRICARE beneficiaries, including 

difficulties with the development of its provider network and the 

processing of referrals to specialty providers—problems that, according to 

TMA officials, the incumbent contractors in the North and South regions 

did not experience.8

Questions have been raised concerning the problems that transpired after 

the West region’s transition to UnitedHealth. You asked us to examine 

whether UnitedHealth was fully prepared for the transition to deliver 

health care, among other issues, including UnitedHealth’s outreach to 

beneficiaries and providers during this time. This report provides 

information on (1) the extent to which TMA provided guidance and 

oversight of the new contractor’s transition period in preparation for health 

care delivery; and (2) how, if at all, TMA’s guidance and oversight during 

the transition period contributed to issues with health care delivery. We 

also provide information on UnitedHealth’s outreach to beneficiaries and 

providers during the transition period and the first 6 months of health care 

delivery. (See app. I.)

To determine the extent to which TMA provided guidance and oversight 

of the new contractor’s preparation for health care delivery, we reviewed 

and analyzed TMA’s guidance on how the transition period was to be 

structured, including the roles of TMA and TRO-West in overseeing 

UnitedHealth’s transition. We also reviewed TMA’s relevant guidance and 

documents for managed care support contract transitions to identify 

requirements for the transition-in of a new contractor and the transitionout of an outgoing contractor. Additionally, we applied federal standards 

for internal control, including risk assessment activities to identify risks 

and analyze their possible effect, and other activities—such as 

documentation of significant events—to help ensure that ongoing 

monitoring is effective.9

 

8

Beneficiaries who use TRICARE Prime—the managed care option—must enroll, and are 

assigned a primary care manager from either an MTF or the civilian provider network. 

Primary care managers may provide the beneficiaries with referrals to specialty care if the 

MTFs are unable to provide that care themselves.

We interviewed officials from TMA, including the 

Transitions Director from the Policy and Operations Directorate and the 

Contracting Officer from the Acquisition Management and Support 

9

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
 

Page 4 GAO-14-505 TRICARE Contractor Transition

Directorate, both in TMA’s Aurora, Colorado office (TMA-Aurora), as well 

as the Transition Manager and Contracting Officer’s Representative from 

TRO-West, to obtain their perspectives on transition activities, including 

oversight provided to UnitedHealth during this period.10 We also 

interviewed officials at UnitedHealth to discuss activities that occurred 

during the transition period, including the extent to which they 

collaborated and communicated with TRO-West officials. TriWest 

Healthcare Alliance Corporation (TriWest), the contractor for the West 

region prior to UnitedHealth, was no longer the contractor when we 

started our review, and as a result, we did not interview TriWest officials 

about the transition.11

To determine how, if at all, TMA’s guidance and oversight during the 

transition period contributed to issues with health care delivery, we 

reviewed and analyzed documents, including UnitedHealth’s contract 

requirements and documents that described the oversight responsibilities 

for TMA-Aurora and the TROs. We interviewed officials from TMA, 

including both the Contracting Officer from TMA-Aurora and the TROWest officials who provide day-to-day oversight of the contract, to discuss 

how transition activities affected health care delivery. We also discussed 

how the problems that occurred after health care delivery were 

addressed, including how TMA used corrective action requests, award 

fees, and performance guarantees to hold the contractor accountable. 

Our work focused on activities and interactions through the first 6 months 

of health care delivery, which ended on October 1, 2013. Because we 

conducted the majority of our audit work prior to the establishment of the 

DHA on October 1, 2013, we refer to TMA throughout most of this report. 

When relevant, we refer to DHA for activities that occurred after that time.

We conducted this performance audit from August 2013 to June 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

 

10TMA’s acquisition and contracting staff are based primarily in Aurora, Colorado.

11TriWest’s contract as the West region’s contractor ended on March 31, 2013.
 

Page 5 GAO-14-505 TRICARE Contractor Transition

Under TRICARE, DOD contracts with private sector health care 

companies to supplement the care provided by military hospitals and 

clinics. These contracts, which are referred to as managed care support 

contracts, are generally performance-based contracts. For such 

contracts, most, but not all, of the requirements include an expected 

outcome, but the manner in which that outcome is to be achieved is left to 

the contractor. Contractors are given discretion in determining how best 

to meet the government’s performance objectives. For example, the 

managed care support contract states that the contractor must maintain 

an adequate network of providers, and the contractor is responsible for 

determining how it will accomplish that objective, including how many 

providers will be in its network.

TMA expected to award the third generation of managed care support 

contracts in each of the three regions in 2009, but bid protests and other 

actions resulted in delays. In the North region, the final contract was 

awarded in May 2010 to the incumbent contractor, Health Net Federal 

Services, after its bid protest against TMA’s initial decision to award the 

contract to Aetna Government Health Plan was sustained. In the South 

region, the final contract was awarded in February 2011 to the incumbent 

contractor, Humana Military Healthcare Services, after its bid protest 

against TMA’s initial decision to award the contract to UnitedHealth was 

sustained.12

As we reported in March 2014, there were two bid protests in the West 

region.13

 

12For additional information on the third generation of TRICARE’s managed care support 

contracts and the associated bid protests, see GAO, Defense Health Care: Acquisition 

Process for TRICARE’s Third Generation of Managed Care Support Contracts, 

The first protest was an agency-level protest filed by 

UnitedHealth in July 2009 challenging the award to TriWest. This protest 

was sustained and included a recommendation that TMA reevaluate 

proposals and make a new source selection decision. In implementing 

this recommendation, TMA allowed offerors to submit revised proposals. 

TMA then reviewed the revised proposals and, based on this review, 

awarded the contract to UnitedHealth. After TMA announced the new 

award, a second West region protest was filed by TriWest in March 2012. 

GAO-14-195 (Washington, D.C.: Mar. 7, 2014).

13See GAO-14-195. 

Background
 

Page 6 GAO-14-505 TRICARE Contractor Transition

GAO denied the second protest and upheld UnitedHealth as the 

contractor for the West region. (See fig. 1.)

Figure 1: Timeline of Events for the Award of TRICARE’s Third-Generation Managed Care Support Contract for the West 

Region

a

TMA held UnitedHealth’s July 2009 West region protest in abeyance while TMA took corrective 

action following a sustained bid protest in the South region, where UnitedHealth was also an offeror. 

Because the request for proposal for the third-generation managed care contracts stated that the 

same offeror could not win contract awards in more than one region, UnitedHealth’s West region 

protest would have become moot if it received the South region award following TMA’s evaluation of 

revised proposals. After TMA awarded the South region contract to Humana in February 2011, 

UnitedHealth’s agency-level protest in the West region was revived.

b

The process for implementing the third generation of managed care 

support contracts involves transitioning health care delivery from the 

outgoing contractor to the incoming contractor. The transition involves 

planning, managing, and monitoring to ensure continuity of services for 

In the sustained agency-level bid protest, TMA’s Contracting Officer recommended that TMA 

reevaluate proposals and make a new source selection decision.
 

Page 7 GAO-14-505 TRICARE Contractor Transition

TRICARE beneficiaries and providers. The transition period officially 

begins when the managed care support contract has been signed by 

DOD and the contractor, and it ends on the health care delivery start 

date.14

TMA has guidance for the management and oversight of managed care 

support contract transitions, as well as for the incoming and outgoing 

contractors. TMA’s management of all of the third-generation contract 

transitions, including the managed care support contract transitions, is 

governed by TMA’s Concept of Operations for TRICARE T-3 Transitions 

Work Group (Concept of Operations).

For the West region, UnitedHealth’s transition period was slightly 

less than 9 months; it began on July 3, 2012, and was completed on 

March 31, 2013, with the health care delivery start date of April 1, 2013.

15 In addition, for oversight of the 

contractor’s performance, TMA uses the TRICARE Acquisitions Directive

(Acquisitions Directive), which establishes roles and responsibilities for 

both TMA and TRO officials and a chain of command to address 

contractor nonconformance.16 According to this directive, the Contracting 

Officer is ultimately responsible for the oversight of the contractor’s 

performance. The Contracting Officer’s Representative assists the 

Contracting Officer with this effort by working with other TRO officials to 

monitor the contractor’s performance.17 The TRO is responsible for the 

day-to-day monitoring of the contractor’s performance during both 

contract transition and health care delivery.18

The managed care support contract also contains guidance and 

requirements for the contractor’s portion of the transition. The contract 

requirements are organized into seven areas, which are considered the 

 

14The transition-in period may vary based on the time necessary to conduct the 

subsequent acquisition and whether incumbents succeed themselves. According to 

10 U.S.C. § 1095c(b), DOD is generally required to allow nonincumbents a 9- to 12-month 

transition-in period. A 10-month transition-in period is considered by the industry to be the 

minimum time necessary for nonincumbents to transition in.

15See TMA, Concept of Operations for TRICARE T-3 Transitions Work Group (2008).

16See TMA, TRICARE Acquisition Directive, TAD 42-02, revision 000 (Falls Church, Va.: 

Feb. 16, 2012).

17The Contracting Officer’s Representative is a TRO employee who is located in the TMAAurora office along with the Contracting Officer.

18For the West region transition, TRO-West was responsible for the day-to-day 

monitoring.
 

Page 8 GAO-14-505 TRICARE Contractor Transition

key focus areas during the transition period because of their importance 

in delivering health care; they are provider network, referral management, 

enrollment, medical management, claims processing, customer service, 

and management. (See table 1.) The contract is also supplemented by 

four TRICARE manuals, including the TRICARE Operations Manual, 

which includes guidance for both the outgoing and the incoming 

contractors, among other requirements.19

Table 1: The Seven Key Focus Areas for TRICARE Managed Care Support Contract Transitions

Areas Description

Provider network The contractor shall provide a managed, stable, high-quality network, or networks, of individual and 

institutional health care providers that supplements the clinical services provided to beneficiaries in 

military treatment facilities (MTF).

Referral management The contractor is required to process all referrals to specialty providers and right of first refusals for the 

MTF in accordance with TRICARE manuals. Right of first refusal is defined as providing the MTF with an

opportunity to review each referral from a civilian provider to determine if the MTF has the capability and 

capacity to provide the medical care and services previously identified in the document that dictates the 

relationship between the contractor and the MTF.

Enrollment The contractor shall perform all enrollments, including correcting enrollment discrepancies when 

necessary.

Medical management The contractor shall ensure that the care it provides, including mental health care, is medically necessary 

and appropriate and complies with the TRICARE benefits contained in regulations. The contractor shall 

use its best practices in managing, reviewing, and authorizing health care services. In addition, the 

contractor shall operate case management programs designed to manage the health care of individuals 

with high-cost conditions or with specific diseases for which evidenced based clinical management 

programs exist.

Claims processing The contractor shall establish, maintain, and monitor an automated information system to ensure claims 

are processed in an accurate and timely manner and meet the functional system requirements as set 

forth in the TRICARE manuals that explain how to process claims.

Customer service The contractor shall provide comprehensive, readily accessible customer service that includes multiple, 

contemporary avenues of access (for example, e-mail, World Wide Web, telephone, and facsimile) for the 

beneficiary. This includes providing telephone access for beneficiaries to use when they have inquiries 

regarding their TRICARE benefit.

Management The contractor shall establish and maintain experienced and qualified key personnel and sufficient 

staffing and management support to meet contractual requirements, including ensuring that the 

information systems that interface with the Department of Defense employ the proper security settings.

Source: GAO analysis of the Department of Defense’s managed care support contract. | GAO-14-505

 

19The other three manuals relate to TRICARE systems, reimbursement, and policies. 

These manuals, while separate documents, are incorporated as part of the contract itself.
 

Page 9 GAO-14-505 TRICARE Contractor Transition

TMA provided some guidance to both TRO-West and UnitedHealth for 

the West region’s managed care support contract transition, but the 

guidance was inadequate because it lacked sufficient specificity on how 

to both oversee the transition and meet certain transition requirements.

Although TRO-West was responsible for the day-to-day management of 

UnitedHealth’s transition, it lacked specific guidance from TMA on how to 

provide oversight, particularly when the contractor had difficulty meeting 

transition requirements. According to TMA-Aurora officials, the Concept of 

Operations is the official guidance for managing the transition of all thirdgeneration TRICARE contracts, including the managed care support 

contracts. We found that this seven-page document outlines a basic 

approach for the transitions, including a general management structure. 

However, it does not provide information on the specific roles and 

responsibilities for managing the day-to-day transition process. It also 

does not contain guidance for addressing any problems that may occur, 

including a process for holding the contractor accountable when transition 

activities are delayed and interim milestones are not met. Separately, the 

Acquisitions Directive provides a basic approach for overseeing a 

contractor’s performance, including performance during a transition 

period. However, we found that this high-level five-page document also 

lacks specificity on how and when to hold a contractor accountable for not 

meeting requirements. For example, it notes that the Contracting Officer 

has the authority to issue a corrective action request in response to the 

contractor’s nonconformance, but does not provide sufficient detail on 

what level of nonconformance would require such response, nor how long 

the Contracting Officer should wait before sending it.

In July 2012, TMA-Aurora officials developed the TMA Transition User 

Guide to supplement the Concept of Operations, which provided morespecific information on how to implement its approach for managing 

TMA’s Guidance on 

Contract Transitions 

Was Inadequate, and 

Its Oversight Was 

Insufficient

TMA’s Transition Guidance 

Was Inadequate for Both 

TRO-West and 

UnitedHealth

Transition Guidance for TROWest
 

Page 10 GAO-14-505 TRICARE Contractor Transition

contract transitions.20

We found that TMA’s transition guidance to UnitedHealth as an incoming 

contractor was also inadequate primarily because UnitedHealth’s 

transition requirements were more specific than those of the outgoing 

contractor, and TMA did not adequately address these differences. The 

managed care support contracts include transition guidance for both the 

incoming and the outgoing contractors that is outlined in the TRICARE 

manuals, most notably the TRICARE Operations Manual.

At over 140 pages in length, this guide established 

a more-detailed structure for the transition process, including key 

management roles and responsibilities for TMA-Aurora and TRO-West 

officials, as well as timelines for important meetings and lessons learned 

from previous contract transitions. However, similar to the Concept of 

Operations and the Acquisitions Directive, it does not address how TROWest officials should provide oversight of the contractor’s activities, 

including what to do when the contractor is not on track to meet 

requirements.

21

The different versions of the manual contributed to information gaps for 

UnitedHealth, which UnitedHealth officials said was an important factor 

that delayed development of their civilian provider network. Specifically, 

UnitedHealth had intended to duplicate at least 95 percent of TriWest’s 

provider network to create a more seamless transition for beneficiaries, 

but to accomplish this, it needed specific information from TriWest that it 

expected to receive as part of the transition. UnitedHealth’s transition 

guidance stated that the outgoing contractor was required to provide the 

incoming contractor with copies of a provider certification file no later than 

30 days after contract award to be updated on a monthly basis until the 

However, 

UnitedHealth’s contract included the 2008 version of the manual, while 

the contract for the outgoing contractor included the 2002 version. 

Despite our attempts to obtain an explanation, TMA-Aurora and TROWest officials could not clearly explain to us why the two contractors were 

not required to follow the same transition guidance.

 

20The Transition User Guide was first used for the West region’s transition, and is 

expected to be used for other TRICARE contract transitions. See TMA, TMA Transition 

User Guide (July 2, 2012).

21Both the contract and the TRICARE manuals also guide requirements after health care 

delivery begins.

Transition Guidance for 

UnitedHealth
 

Page 11 GAO-14-505 TRICARE Contractor Transition

start of health care delivery.22 However, TriWest’s transition guidance 

only contained a reference to a provider certification file, but did not 

define its contents, link it to other provider files specifically mentioned, or 

stipulate a time frame for producing it. Instead, TriWest’s guidance stated 

more generally that the outgoing contractor was required to provide full 

cooperation and support to the incoming contractor and was silent on 

when the provider certification file had to be delivered.23 TriWest did not 

provide this file within 30 days, but UnitedHealth and TriWest officials 

were able to reach a compromise about the provision of the needed 

information. As a result, TriWest provided UnitedHealth with a provider 

certification file in late August 2012. However, this was almost a month 

later than UnitedHealth expected to receive the information based on its 

transition guidance. Furthermore, UnitedHealth officials told us that 

because there was no guidance on the transfer of the provider 

certification file between incoming and outgoing contractors, they 

received a file with nearly 700,000 provider records without any data 

definitions. As a result, UnitedHealth officials told us that they had to 

spend several months working with the data to make them usable for their 

purposes. In this instance, the lack of consistent transition guidance for 

the outgoing and incoming contractors affected the incoming contractor’s 

ability to meet transition requirements. Federal standards for internal 

control note that an agency is responsible for the establishment and 

monitoring of performance measures—which would include ensuring 

consistent transition guidance.24

TMA’s transition guidance to UnitedHealth also lacked sufficient 

specificity for some of the seven key focus areas it had identified in the 

contract as being important for health care delivery, such as referral 

management. TRICARE has a unique referral process that provides 

MTFs with the right of first refusal when TRICARE Prime beneficiaries are 

referred for specialty care—a practice that helps maximize the use of the 

military’s direct care system. As a result, contractors would need to have 

 

22See TRICARE Operations Manual 6010.56-M (Aurora, Colo.: Feb. 1, 2008), chapter 1, 

section 7, paragraph 4.3.11. The provider certification files would contain demographic 

information on the outgoing contractor’s network of civilian providers, including the 

numbers of providers, their specialties (if any), and addresses.

23See TRICARE Operations Manual 6010.51-M (Aurora, Colo.: Aug. 1, 2002), chapter 1, 

section 8, paragraph 4.4.3.1.

24See GAO/AIMD-00-21.3.1.
 

Page 12 GAO-14-505 TRICARE Contractor Transition

a referral management system that could electronically interface with the 

referral management systems used by the region’s MTFs to facilitate this 

process. However, the TRICARE manuals do not contain guidance for the 

contractors on how to establish this interface. In contrast, DOD provides 

detailed guidance for establishing interfaces with other, more centralized 

DOD systems, such as the guidance for interfacing with the Defense 

Enrollment Eligibility Reporting System.25 A TRO-West official explained 

that the lack of specific guidance for a referral management interface is 

likely due to the fact that the military services use different referral 

management systems, and there is no central DOD system for this 

process. At the time, the military services used one of two referral 

management systems.26 UnitedHealth officials told us that they did not 

learn about the MTFs’ different systems until a month into the transition 

period, which affected their timeliness in developing an automated referral 

management system to interface with the systems used by the region’s 

MTFs. Additionally, during that time, there were also discussions within 

DOD to adopt one of these referral management systems for use across 

all of the military services by March 2013. As a result, UnitedHealth 

officials told us that they developed a referral management system that 

could receive faxed referrals from the MTFs with the expectation that they 

would develop an automated interface once more information was 

available about which single referral management system DOD would 

adopt.27

In addition, unlike some other key focus areas, including customer service 

(call centers) and claims processing, TMA did not test UnitedHealth’s 

referral process prior to health care delivery. According to both TRO-West 

and UnitedHealth officials, this testing was not conducted because it was

not required by transition guidance. Both TRO-West and UnitedHealth 

officials agreed that such testing would have been beneficial for 

determining whether their interface would work at the start of health care 

 

25The Defense Enrollment Eligibility Reporting System is a database that contains the 

service-related and demographic data that are used to determine eligibility for military 

benefits, including health care, for all active duty servicemembers, military retirees, and 

the dependents and survivors of active duty servicemembers and military retirees.

26The Army used one type of referral management system, the Air Force used another 

type of referral management system, and the Navy used the same system as the Air 

Force’s, in addition to manual faxing.

27A TRO-West official told us that as of November 2013 each of the military departments 

was using the same referral management system.
 

Page 13 GAO-14-505 TRICARE Contractor Transition

delivery. Providing sufficient specificity for, and testing, this system and 

other systems identified as critical for health care delivery would better 

align with federal standards for internal control, which recommend that 

once an agency has identified areas of risk, such as referral 

management, it should analyze those areas, formulating an approach to 

manage and mitigate them.28

TMA-Aurora and TRO-West officials provided insufficient oversight of the 

West region’s contractor transition because they took limited action in 

response to the concerns they identified and did not resolve their 

concerns promptly. Specifically, the Contracting Officer and TRO-West 

officials provided oversight by following the structured process outlined in 

the TMA Transition User Guide. For example, they held specific types of 

meetings defined in the guide, such as a “kick-off meeting” with 

UnitedHealth officials shortly after the transition period began to discuss 

high-level transition strategies; meetings were also held to discuss 

interfacing DOD and UnitedHealth computer systems. Additionally, TROWest officials reviewed UnitedHealth’s weekly transition reports and 

participated in weekly meetings with UnitedHealth officials to discuss their 

progress in meeting transition requirements. TRO-West officials did not 

maintain formal agency records of these weekly meetings, and they could 

only provide us with examples of handwritten notes of the discussions 

that transpired. Although the notes provide a general outline of topics 

discussed, they lack the degree of specificity that would allow us to 

determine, without making assumptions, the nature of any concerns 

raised by TRO-West officials or how UnitedHealth responded. We 

therefore determined that these notes provided insufficient evidence of 

the agency’s oversight actions during the transition period.29

Due to delays in the awarding of the contract, the Contracting Officer told 

us that there were discussions with TRO-West and UnitedHealth officials 

as early as July 2012 about whether the transition period should be 

extended. According to the Contracting Officer, a decision was ultimately 

 

28See GAO/AIMD-00-21.3.1.

29According to generally accepted government auditing standards, evidence is not 

sufficient or appropriate when using the evidence carries an unacceptably high risk that it 

could lead the auditor to reach an incorrect or improper conclusion. See GAO, 

Government Auditing Standards, GAO-12-331G (Washington, D.C.: December 2011), 

paragraph 6.71(b).

TMA’s Oversight of 

UnitedHealth’s Transition 

Was Insufficient
 

Page 14 GAO-14-505 TRICARE Contractor Transition

made in September 2012 to continue with the expected plan, after 

UnitedHealth officials assured TMA that they would be able to meet the 

transition requirements by the start of health care delivery—an assurance 

that UnitedHealth officials confirmed. The Contracting Officer told us that 

none of these discussions were documented because the decision not to 

extend the transition period did not represent a change from what was 

already required. Although TRO-West officials told us that there were no 

indications at the time that the health care delivery start date should be 

delayed, these officials later told us that they had limited data on which to 

base their determination, in part because it was so early in the transition 

period. According to federal standards for internal control, sufficient 

information should be identified and captured in a time frame that permits 

program managers (such as the Contracting Officer or TRO-West 

officials) to make effective decisions.30

Despite not delaying the health care delivery start date, TMA-Aurora and 

TRO-West officials told us that they had concerns with UnitedHealth’s 

determination of how it would meet, and its progress toward meeting, 

several of the transition requirements. TRO-West officials told us that 

because the contract is performance-based, they had difficulty holding the 

contractor accountable until an actual requirement was missed, and were 

only able to express their concerns regarding the progress to 

UnitedHealth’s officials. However, TRO-West officials could not provide 

sufficient documentation of these conversations with UnitedHealth. In 

addition, while we recognize that under a performance-based contract an 

agency does not provide detailed instructions to the contractor on how to 

meet its requirements, we do not believe that a performance-based 

contract diminishes TMA’s responsibility to provide an oversight structure 

for managing the contractor’s performance during the transition period. As 

we have previously reported, important attributes of a performance-based 

contract include measurable performance standards and a quality 

assurance plan for evaluating the contractor’s performance.

Without such pertinent information, 

the Contracting Officer and TRO-West officials cannot ensure that they 

made an informed determination about whether to extend the transition 

period.

31

 

30See 

The 

GAO/AIMD-00-21.3.1.

31For more information on performance-based contracts, see GAO, Contract 

Management: Guidance Needed for Using Performance-Based Service Contracting, 

GAO-02-1049 (Washington, D.C.: Sept. 23, 2002).
 

Page 15 GAO-14-505 TRICARE Contractor Transition

contract with UnitedHealth contains these features. Taken together, these 

contract provisions created an obligation on the part of the department to 

provide sufficient oversight to ensure that the contractor was performing 

as required.

Although TRO-West monitored UnitedHealth’s progress and had 

concerns about its performance, it did little to resolve them, and could not 

always provide documentation of the communication of these concerns to 

UnitedHealth. In one instance, TRO-West officials told us that they were 

concerned about UnitedHealth’s ability to meet call center requirements 

because they were concerned about the staffing numbers that 

UnitedHealth had proposed. Specifically, UnitedHealth was required to 

hire a sufficient number of staff to answer customer service calls from 

beneficiaries and providers within prescribed time frames. However, the 

determination of how many staff to hire was ultimately UnitedHealth’s 

decision.32

 

32The contract prescribes several requirements related to the answering of customer 

service calls, including that 90 percent of calls should be answered by a customer service 

representative within 30 seconds. See TRICARE Operations Manual 6010.56-M, 

chapter 1, section 3.

UnitedHealth officials told us that in order to determine how 

many call center staff were needed, they estimated the efficiency of their 

call center staff and applied that to an estimated volume of customer 

service calls, which was based on TriWest’s daily average plus an 

additional 50 percent to factor in a heavier call volume for the start of 

health care delivery. UnitedHealth officials told us that they were unable 

to obtain staffing numbers from TriWest because the numbers were 

proprietary. However, TRO-West officials told us that based on their 

comparisons of UnitedHealth’s call center staffing numbers to those of 

TriWest’s, they expressed concerns to UnitedHealth about the adequacy 

of its call center staffing estimate. TRO-West officials said that 

UnitedHealth officials replied that their staffing numbers should be 

sufficient, but if needed, they would be able to transfer staff from other 

departments to provide coverage. However, UnitedHealth officials did not 

recall these discussions in our interviews, and TRO-West officials could 

not provide documentation that they took place. TRO-West’s approach 

was inconsistent with federal standards for internal control, which state 

that management should have a strategy for documenting significant 
 

Page 16 GAO-14-505 TRICARE Contractor Transition

events, which would include TMA’s communication of concerns about the 

contractor’s performance in meeting requirements.33

When UnitedHealth missed deadlines for transition requirements, TMA 

either did not take, or was slow to take, formal action, and it did not 

sufficiently document all of its informal actions. For example, TRO-West 

officials told us that on several occasions, starting in November 2012, 

they expressed concerns to UnitedHealth that it was not progressing 

sufficiently with meeting two of the requirements related to the 

development of its provider network. Specifically, UnitedHealth was 

required to have both its network of civilian providers (including primary 

care managers and other provider specialties) signed to contracts and the 

providers’ relevant information entered into its databases 60 days prior to 

health care delivery.34

Although UnitedHealth was not always timely in meeting transition 

requirements, it did not face any financial penalties as a result. According 

to its contract, UnitedHealth was eligible for a transition-in payment of 

$10 million to be paid in two increments, with the last payment following 

completion of all transition requirements.

Although UnitedHealth provided updates in its 

weekly transition reports on its progress in meeting these requirements, 

including assurances to TRO-West officials that they would be met, it did 

not ultimately meet the requirements on time. TRO-West officials told us 

that after the requirements were not met, they held informal discussions 

with UnitedHealth officials during weekly transition meetings to determine 

how UnitedHealth would come into compliance. Although TRO-West 

officials could not provide sufficient documentation of these discussions, 

they were able to provide examples of emails sent to UnitedHealth about 

these concerns. According to the Contracting Officer, he did not take 

formal action at that time in order to allow TMA-Aurora and TRO-West 

officials to exercise other informal mechanisms for resolving the issue. 

UnitedHealth did not complete this requirement until June 2013—more 

than 4 months late.

35

 

33See 

The Contracting Officer told us 

that because the contract did not specify that the transition-in payment 

GAO/AIMD-00-21.3.1.

34See TRICARE Operations Manual 6010.56-M, chapter 1, section 7, paragraph 2.2.1.

35The transition-in payment is a negotiated incentive to UnitedHealth for completing the 

transition. While all of the contractors are eligible for transition-in payments, the amount of 

the payment is negotiated as part of the contract and varies by region.
 

Page 17 GAO-14-505 TRICARE Contractor Transition

was subject to timely completion of the transition requirements, TMA’s 

interpretation was that it had to award the payment without regard to 

whether the contractor met the transition’s timeliness requirements. 

However, our previous work has found that performance-based contracts 

should include incentives—either positive or negative, or a combination of 

both—to encourage better quality performance.36 In this instance, TMA 

determined in December 2013 that UnitedHealth completed all of its 

transition requirements—about 8 months after health care delivery began. 

TMA subsequently awarded UnitedHealth the remainder of its transitionin payment in February 2014.

TMA’s inadequate guidance and insufficient oversight of UnitedHealth’s 

transition contributed to problems at the start of health care delivery, 

which in turn led to the disruption in the continuity of care for some 

beneficiaries and potentially cost the department millions of dollars, 

according to Army officials. Specifically, inadequate guidance and 

insufficient oversight contributed to UnitedHealth’s health care delivery 

problems, including those related to its provider database, referral 

processing, and call center responsiveness. As a result of these 

difficulties, TMA-Aurora and TRO-West officials increased their oversight 

of UnitedHealth, took steps to hold the contractor accountable for the 

problems that had transpired, and updated the guidance (TMA Transition 

User Guide).

Provider database: The different versions of transition guidance and 

insufficient oversight contributed to information gaps for UnitedHealth, 

which UnitedHealth officials said was an important factor that led to its 

difficulties in creating its provider database. UnitedHealth did not have 

information for all its civilian network providers entered into its provider 

database until June 2013—more than 4 months after the contract 

deadline of January 30, 2013. Referrals and claims related to these 

providers had to be put on hold until UnitedHealth officials could complete 

the data entry process. Additionally, at the start of health care delivery, 

UnitedHealth officials told us that they had not entered information on 

 

36See GAO-02-1049. 

Inadequate Guidance 

and Insufficient 

Oversight during the 

Contractor Transition 

Contributed to Health 

Care Delivery 

Problems, but 

Ultimately Led to 

Greater Oversight
 

Page 18 GAO-14-505 TRICARE Contractor Transition

primary care managers for 113,000 TRICARE Prime beneficiaries,37 and 

some of these beneficiaries had to be temporarily reassigned to a new 

primary care manager.38

Referral processing: The absence of transition guidance on developing 

a referral management interface contributed, in part, to UnitedHealth’s 

difficulties in establishing an automated referral management system, 

which inconvenienced beneficiaries and was potentially costly for the 

government. Because DOD had not decided which referral management 

system would be used in the region, UnitedHealth officials told us that 

they could only receive faxed referrals from MTFs during the first few 

months of health care delivery. This situation contributed to inordinate 

processing delays along with a higher-than-expected number of referrals 

and staff who were not as efficient as anticipated. Specifically, 

UnitedHealth expected its staff to process about 7,000 referrals a day. 

Instead, during the first few days of health care delivery, they processed 

about 2,500 per day. On May 2, 2013, the director of TMA issued a 

temporary waiver of the requirement for TRICARE Prime beneficiaries to 

obtain referral authorizations for specialty care. This waiver was initially 

effective for the first 6 weeks of health care delivery starting on April 1, 

2013, and was subsequently extended through July 2, 2013. Officials 

from the Army estimated that these waivers could cost the department 

over a million dollars in lost resources because they impeded the right of 

first refusal for the MTFs, which potentially resulted in more beneficiaries’ 

obtaining specialty care from civilian providers, costing the government 

additional money. During this time, UnitedHealth hired more staff and 

increased its efficiency at processing referrals, and in July 2013—about 

4 months after the start of health care delivery—it was able to meet and 

exceed the contract requirement of processing 90 percent of referrals 

within 2 workdays. While UnitedHealth has not yet met its requirement to 

When UnitedHealth had completed entering 

information about its primary care managers 3 weeks after the start of 

health care delivery, the beneficiaries who had been reassigned were 

moved back to their original primary care manager if they requested it.

 

37Beneficiaries who use TRICARE Prime—a managed care option—must enroll and are 

assigned a primary care manager (generally, a primary care physician, internal medicine 

physician, or general practitioner physician), who either provides care or authorizes 

referrals to specialists.

38If beneficiaries had a primary care manager whose information had not yet been entered 

into UnitedHealth’s provider database, they were only temporarily reassigned to a different 

primary care manager if they called to inquire about this issue.
 

Page 19 GAO-14-505 TRICARE Contractor Transition

process 100 percent of all referrals within 3 workdays, it is currently 

processing 99 percent of referrals within this time frame.39

Call centers: TMA’s oversight of UnitedHealth’s plans for staffing its call 

centers was insufficient, which contributed to a delayed resolution of 

UnitedHealth’s performance problems, which lasted until the third month 

of health care delivery. Specifically, UnitedHealth experienced difficulties 

in answering telephone calls within the required time frame on the first 

day of health care delivery. This was based, in part, on insufficient 

numbers of call center staff and staff who were not as efficient as 

UnitedHealth had anticipated, along with a higher-than-predicted call 

volume. For the month of April 2013, UnitedHealth officials expected 

about 23,500 calls each day, and they hired the number of staff they 

thought they would need to answer 90 percent of these calls (21,150) 

within 30 seconds, as required by the contract. However, during the first 

month of health care delivery, the daily number of calls received was 

about 24,000, and the number of calls answered within the required time 

frame ranged from a low of about 2,200 calls (9 percent) to a high of 

almost 16,000 calls (67 percent). To meet telephone response time 

requirements, UnitedHealth told us that they used staff from its other 

departments, subcontracted for additional staff, and hired more staff to 

alleviate the call center problems.

In addition, 

UnitedHealth officials told us that they currently use both automated and 

fax referral systems, depending on the MTF.

40

After the problems related to network providers, referral processing, and 

call centers transpired, TRO-West increased its oversight by sending 

UnitedHealth formal correspondence related to its failure to meet specific 

contractual requirements. After consulting with TRO-West officials, the 

Contracting Officer issued the first of three related corrective action 

Once UnitedHealth hired and trained 

more call center staff, the staff from other departments and its 

subcontractor were returned to their previous responsibilities. 

UnitedHealth began meeting its telephone response time requirements in 

June 2013.

 

39See TRICARE Operations Manual 6010.56-M, chapter 1, section 3, paragraph 1.2.1.

40UnitedHealth subcontracted with several entities to meet the requirements of its 

contract. One of those entities, Health Net—the managed care support contractor in the 

North region—assisted with the hiring of about 100 staff to help alleviate call center 

problems.
 

Page 20 GAO-14-505 TRICARE Contractor Transition

requests—a written request for action describing missed contractual 

requirements—to UnitedHealth on April 5, 2013, for the referral delays 

and other issues. This corrective action request cited problems with 

referral processing and the entry of information about primary care 

managers into UnitedHealth’s provider database. Further, the request 

asked that UnitedHealth submit a corrective action plan—a plan 

demonstrating how the requirements would be met—as soon as possible. 

While the effect of these issues on the call centers was mentioned, the 

call center response times were not addressed in this request. However, 

the Contracting Officer determined that UnitedHealth’s initial response 

was vague and inadequate. As a result, he repeated the corrective action 

request process two more times in April 2013. Finally, on May 1, 2013, 

UnitedHealth submitted a corrective action plan that was deemed 

adequate by the Contracting Officer.

Additionally, based on UnitedHealth’s performance during the first 

6 months of health care delivery, TMA-Aurora and TRO-West officials 

determined that UnitedHealth would be financially penalized through 

performance guarantees and award fees in accordance with contract 

requirements.

Performance guarantees: The West region managed care support 

contract includes performance guarantees, which are financial penalties 

based on the contractor’s performance in meeting certain requirements. 

Specifically, if a contractor does not meet requirements in six areas 

related to customer service and claims processing, such as answering 

90 percent of phone calls from beneficiaries within 30 seconds and 

processing 100 percent of claims within 90 days, they are financially 

penalized. However, these six areas do not include all of the contract 

requirements that TMA identified for the seven key focus areas, such as 

referrals and provider network adequacy. Therefore, these guarantees do 

not reflect the contractor’s performance in those areas. TMA calculates 

whether the contractor meets these guarantees on a quarterly basis. If 

the contractor does not meet the requirement, TMA-Aurora uses a 

contractually defined formula to determine how much money it will be 

penalized. For the first and second quarter, TMA-Aurora officials 

determined that UnitedHealth would be penalized about $134,000. A 
 

Page 21 GAO-14-505 TRICARE Contractor Transition

majority of this penalty resulted from its failure to answer 90 percent of all 

customer service calls within the required 30 seconds.41

Award fee: The West region managed care support contract also 

includes financial incentives through an award fee, which is calculated 

twice a year and is based on the contractor’s provision of exceptional 

service that is above and beyond contractual requirements. The 

determination of the award fee is based on a combination of the results of 

satisfaction surveys conducted of MTFs, beneficiaries, and providers on 

the contractor’s performance (50 percent of the award fee) and an 

evaluation of the performance (the other 50 percent of the award fee).42

The survey portion of the award fee requires that a contractor must

receive a composite score of 4.5 or higher on a scale of 6 to receive any 

portion of the payment. UnitedHealth received a composite score of 4 for 

the first 6 months of health care delivery. For the portion of the award fee 

based on an evaluation of UnitedHealth’s performance, a panel of TMA 

officials, including both TMA-Aurora and TRO-West officials, determined 

that there were no occurrences where UnitedHealth’s performance 

exceeded contractual requirements. Consequently, the panel 

recommended in December 2013 that UnitedHealth should not receive 

any portion of the over $7 million potential award fee for the first 6 months 

of health care delivery.43

In an effort to prevent similar transition difficulties in the future, TMAAurora officials updated the TMA Transition User Guide in May 2013 with 

several of the lessons learned from the West region transition, including 

ensuring that the contractor has pertinent information about all primary 

care managers entered into its provider database prior to the start of 

health care delivery and testing the contractor’s referral interface prior to 

that date. However, while these updates are helpful, this guide remains 

 

41While all of the contractors are evaluated using the same six criteria, the maximum 

amount the contractor could be penalized is negotiated as part of the contract and may 

vary by region. UnitedHealth’s penalty was taken in April 2014.

42The evaluation of the contractor’s performance is conducted by several TMA officials, 

including the Contracting Officer, and these officials subjectively evaluate whether 

UnitedHealth exceeded contract requirements related to several areas, including 

maintaining an efficient referral management.

43On an annual basis, the potential award fee for UnitedHealth is about $15 million. While 

all of the contractors are evaluated using the same criteria, the amount of the award fee is 

negotiated as part of the contract and may vary by region.
 

Page 22 GAO-14-505 TRICARE Contractor Transition

limited because it is not sufficiently specific, and some of these changes 

would likely need to be formally incorporated into the managed care 

support contracts.

The transition of managed care support contractors in the West region did 

not go smoothly. Many problems arose that negatively affected TRICARE 

beneficiaries and potentially resulted in additional costs for DOD. 

UnitedHealth was the first new managed care support contractor since 

the TRICARE program began, and its transition highlighted numerous 

deficiencies in TMA’s guidance and oversight. In particular, insufficient 

guidance on transition oversight contributed to a complacent approach by 

TRO-West officials, who did little to hold the contractor accountable 

during the transition, aside from holding informal conversations that were 

not always sufficiently documented. While TRO-West officials also cited 

the performance-based contract as a basis for their approach, this type of 

contract does not diminish their responsibility to provide an oversight 

structure to manage the contractor’s performance in meeting 

requirements. Furthermore, TMA failed to ensure that the incoming and 

outgoing contractors used the same version of transition guidance, 

resulting in information gaps that were left largely to the contractors to 

resolve, contributing to UnitedHealth’s delay in meeting transition 

requirements related to its provider network. And, while TMA did consider 

the possibility of extending the transition period, TRO-West officials cited 

a lack of sufficient information to make an informed decision at the time 

the decision was being considered. Moreover, the transition guidance for 

UnitedHealth also lacked sufficient detail for some requirements, 

including the development of a critical interface for managing specialty 

care referrals, which was not pretested to ensure that it was fully 

operational prior to health care delivery, unlike pretesting that was done 

for other system interfaces.

The confluence of these factors led to a particularly problematic start for 

health care delivery in TRICARE’s West region, as evidenced by events 

such as call center failures and inordinate delays in processing specialty 

care referral authorizations. The latter problem necessitated that TMA 

waive its authorization requirements for 3 months—a costly workaround 

for DOD. Despite these difficulties, approximately 10 months after the 

start of health care delivery, TMA paid UnitedHealth the remainder of its 

$10 million transition-in payment after UnitedHealth completed its 

transition requirements. Eventually, TMA did begin taking steps to hold 

the contractor accountable for the problems that surfaced, including the 

use of corrective action requests and financial penalties. In an effort to 

Conclusions
 

Page 23 GAO-14-505 TRICARE Contractor Transition

prevent similar problems in future transitions, TMA also modified the 

guidance provided in the TMA Transition User Guide. However, the 

effectiveness of this modification is unclear because this guidance is not 

sufficiently specific and would likely require contractual changes. Without 

adequate guidance, DHA—which assumed oversight responsibility for 

TMA in 2013—cannot provide reasonable assurance that its efforts to 

oversee future managed care support contract transitions will be effective 

in ensuring that contractors are prepared for health care delivery, 

including meeting all contract requirements and appropriately serving 

their TRICARE beneficiaries.

To ensure that DHA provides appropriate levels of oversight and 

accountability to future managed care support contractor transitions, we 

recommend that the Secretary of Defense require the Director of DHA to 

review existing transition guidance, and revise as needed, to include 

sufficient specificity about

1. A requirement that all significant oversight communication between 

the TRO and the contractor be sufficiently documented, particularly 

communication regarding concerns about the contractor’s ability to 

meet transition requirements and deadlines;

2. A requirement that the TROs and Contracting Officers have sufficient 

data and information from the contractor at a defined point in time to 

make an informed determination about whether to extend the 

transition period;

3. A process for identifying and monitoring all key focus areas, including 

the pretesting of key functions and interfaces prior to the start of 

health care delivery; and

4. A course of action for holding the contractor accountable for problems 

that transpire in meeting transition requirements or deadlines.

In addition, to ensure that future managed care support contractors have 

the information they need to successfully complete transition 

requirements and are fully prepared for health care delivery, we 

recommend that the Secretary of Defense require the Director of DHA to

5. Ensure that both the incoming and the outgoing contractors are using 

consistent versions of transition guidance;

6. Revise the contractors’ transition guidance to contain clear definitions 

and an appropriate level of specificity, particularly for key focus areas 

identified by DHA, such as referral management; and

Recommendations for 

Executive Action
 

Page 24 GAO-14-505 TRICARE Contractor Transition

7. Conduct a review of whether the transition-in payment should be 

designed to incentivize timely completion of transition requirements 

and deadlines.

We provided a copy of this report to DOD for review and comment. DOD 

stated that we made two specific assertions that it wanted to clarify: 

(1) that TMA guidance and oversight during the transition period 

contributed to issues with health care delivery; and (2) that this is the first 

transition to a nonincumbent contractor since the start of the TRICARE 

program. In addition, with regard to the recommendations, DOD either 

concurred or partially concurred with all of our recommendations. DOD’s

written comments are reprinted in appendix II.

We disagree with DOD’s statement that our report mischaracterized these 

two issues. With regard to our statement that TMA guidance and 

oversight during the transition period contributed to issues with health 

care delivery, DOD states that the report misinterprets two distinctly 

separate transition requirements: establishing an adequate provider 

network and transferring provider certification files for claims processing. 

While we understand that the establishment of an adequate network is 

the responsibility of the incoming contractor, our report notes that 

UnitedHealth expected to use the provider certification files from the 

outgoing contractor to help establish its own provider network. However, 

differences in specificity between the two versions of transition guidance 

for the incoming and outgoing contractors contributed to the delay of the 

transfer of these files. Furthermore, UnitedHealth spent several months 

working with the provider certification data they eventually received in 

order to make the data usable for its purposes—all of which contributed to 

UnitedHealth’s delay in establishing an adequate provider network within 

required time frames. Ultimately, UnitedHealth did not meet its 

requirement to complete network development and load all of the provider 

files 60 days prior to health care delivery. TMA was slow to take action—

waiting more than 2 months to send a corrective action request related to 

this missed requirement. Because UnitedHealth did not have information 

for all its civilian network providers entered into its provider database at 

the start of health care delivery, referrals and claims related to these 

providers had to be put on hold until UnitedHealth officials could complete 

the data entry process, potentially impacting beneficiaries’ access to 

health care. Additionally, at the start of health care delivery, UnitedHealth 

officials told us that they had not entered information on primary care 

managers for 113,000 TRICARE Prime beneficiaries and that some of 

these beneficiaries had to be temporarily reassigned to a new primary 

Agency Comments
 

Page 25 GAO-14-505 TRICARE Contractor Transition

care manager until the data entry process was complete. Based on this 

evidence, we disagree with DOD’s statement that issues arising from the 

transfer of the provider certification files would not impact access to 

health care delivery. We also disagree with DOD’s statement that our 

finding to the contrary is an assertion rather than an objective assessment 

of the facts.

DOD also wanted to clarify our statement that the transition to the West 

region’s contractor was the first transition to a nonincumbent contractor 

since the start of the TRICARE program. DOD noted that TMA has

successfully transitioned a nonincumbent contractor for the delivery of 

health care services on numerous occasions. We believe that DOD 

misinterpreted our statement, because for the purposes of our report, we 

use the term “contractor” to refer to a managed care support contractor. 

Aside from citing MetLife Federal Dental Plan as an example, DOD listed 

three other contractors that previously participated in the first generation 

of TRICARE managed care support contracts. However, none of them 

participated in a TRICARE managed care support contract transition as a 

nonincumbent.44

In addition, DOD made the point that our report did not recognize 

numerous occasions when TMA representatives conducted onsite 

readiness reviews and pretesting activities and that it was important to 

note the government exacted numerous financial and other sanctions on 

UnitedHealth because of its inability to meet contract requirements. Our 

report acknowledges that TMA conducted readiness reviews and some 

pretesting activities. However, as stated in our report, TMA did not pretest 

UnitedHealth’s referral process, which TRO-West officials told us would 

have been beneficial for determining whether the referral process would 

work prior to health care delivery. Furthermore, we believe it is important 

Therefore, we believe that our statement that 

UnitedHealth’s transition in the West region represented the first transition 

to a nonincumbent managed care support contractor since the TRICARE 

program began is accurate. 

 

44The three other examples of contractors were Sierra Military Health System, Health Net 

Federal Services, and Anthem Alliance for Health, Inc. Although Sierra Military Health 

System and Anthem Alliance for Health, Inc., were contractors under the first generation 

of TRICARE manage care support contracts, neither participated in the transition to the 

second generation of contracts. In addition, Health Net Federal Services—formerly 

Foundation Federal Health Services—has been a contractor since the first generation of 

TRICARE contracts, and as a result, it has not participated in a TRICARE managed care 

support contract as a nonincumbent.
 

Page 26 GAO-14-505 TRICARE Contractor Transition

to stress that TMA did not exact any financial or other sanctions during 

transition. Specifically, as our report discusses, UnitedHealth was not 

always timely in meeting the transition requirements, yet it was not 

financially penalized. TMA did not issue any corrective action or 

financially related sanctions until after health care delivery. To date, TMA 

has provided evidence of two financially related sanctions—performance 

guarantees and award fees—which were discussed in our report. 

However, these financially related sanctions were for missed 

requirements that took place after health care delivery began, and were 

not imposed as a result of the missed transition requirements.

DOD concurred or partially concurred with each of our recommendations. 

However, DOD disagreed with some of the related findings upon which 

these recommendations were based. Additionally, despite its 

concurrence, DOD did not always provide details on how it plans to 

implement our recommendations. DOD’s specific responses to each of 

our recommendations are as follows:

• DOD partially concurred with our first recommendation to require that 

all significant oversight communication between the TRO and the 

contractor be sufficiently documented. While DOD agreed with the 

substance of this recommendation, it disagreed with our finding that it 

could not provide us with sufficient documentation of the 

communication of its concerns to UnitedHealth about its ability to 

meet transition and performance requirements and deadlines. DOD

noted that it provided thousands of pages of comprehensive 

documentation of both formal and informal correspondence with 

UnitedHealth—essentially stating that it is already meeting this 

recommendation and implying that no additional action is necessary. 

While we agree that DOD was able to provide documentation of its 

oversight, not all of it reflected its communication of specific concerns 

with UnitedHealth. For example, DOD could not provide 

documentation regarding its concerns about the call center staffing 

that UnitedHealth had proposed—discussions that UnitedHealth 

officials did not recall during our interviews. Further, the 

documentation of DOD’s communications with UnitedHealth was 

largely dependent upon handwritten notes, which were difficult to 

understand without extensive explanation by DOD officials. We 

therefore continue to believe that our recommendation remains valid.
 

Page 27 GAO-14-505 TRICARE Contractor Transition

• DOD concurred with our second recommendation to require that the 

TRO and Contracting Officers have sufficient data and information to 

make an informed determination about whether to extend the 

transition period. DOD's comments indicate that it has already 

undertaken steps to implement this action, but did not provide any 

time frames for when this activity would be complete. 

• DOD concurred with our third recommendation to require a process 

for the identification and monitoring of all key focus areas, including 

the pretesting of key functions. DOD noted in its comments that prior 

to our review, DHA began redefining contract requirements for 

transition and oversight. DOD added that this effort would include 

revised transition requirements for pretesting. In addition, DOD stated 

that an independent contractor will be used to assess key systems, 

interfaces, and performance. 

• DOD partially concurred with our fourth recommendation to review 

existing transition guidance and revise as needed to include sufficient 

specificity and accountability for meeting transition requirements or 

deadlines. DOD noted that during its review of existing transition 

guidance, it will consider whether specific guidance for the 

Contracting Officer is needed. Although DOD stated that contract 

administration matters require a certain degree of discretion and 

business judgment, we found that the Contracting Officer was 

inconsistent in using his authority to take formal action against 

UnitedHealth when it missed transition requirements. We therefore

believe that implementing this recommendation is critical to ensure 

that future transitions—particularly those of nonincumbent 

contractors—proceed without incident.

• DOD concurred with our fifth recommendation to ensure that both the 

incoming and the outgoing contractors are using consistent versions 

of transition guidance. However, DOD also noted in its comments that 

the progression from the 2002 manuals to the 2008 manuals did not 

create a wholesale change between the two versions and that the use 

of the two versions was not a contributory factor in the difficulties that 

transpired during the transition. While we agree that the changes in 

the manuals were not necessarily wholesale, there was a difference in 

the level of specificity, which UnitedHealth said contributed to 

problems with its transition. Specifically, the 2008 version noted that 

the outgoing contractor was required to provide the incoming 

contractor with copies of a provider certification file no later than 

30 days after contract award, to be updated on a monthly basis until 
 

Page 28 GAO-14-505 TRICARE Contractor Transition

the start of health care delivery. However, the 2002 version contained

only a reference to the provider certification file, and did not define its 

contents, link it to other provider files specifically mentioned, or 

stipulate a time frame for producing it. Further, the 2002 version 

stated more generally that the outgoing contractor was required to 

provide full cooperation and support to the incoming contractor. 

Therefore, we continue to believe that the differences in the two 

versions of the manuals created an information gap, which 

UnitedHealth officials identified as an important factor that delayed 

development of its civilian provider network, and that action to 

respond to our recommendation is needed. 

• DOD concurred with our sixth recommendation that the contractors’ 

transition guidance should be revised to contain clear definitions and 

an appropriate level of specificity, particularly for key focus areas 

identified. DOD stated that the key focus areas with the associated 

risk for each area should be clearly identified with the appropriate 

level of specificity by DHA, while still ensuring that the contract 

language is not overly prescriptive to allow contractors to use best 

business practices. While we understand DOD’s concern about not 

being overly prescriptive, we believe our findings illustrate why having 

clear definitions and sufficient specificity is vital to ensuring that future 

transitions are successful, and why action is needed. 

• DOD also concurred with our seventh recommendation to conduct a 

review of whether the transition-in payment should be designed to 

incentivize timely completion of transition requirements and deadlines. 

In addition, DOD stated that the transition requirements should have 

both positive and negative incentives for the contractor to achieve 

satisfactory progress.

We are sending copies of this report to the Secretary of Defense and 

appropriate congressional committees. The report is also available at no 

charge on GAO’s website at http://www.gao.gov. 
 

Page 29 GAO-14-505 TRICARE Contractor Transition

If you or your staff members have any questions about this report, please 

contact me at (202) 512-7114 or draperd@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on

the last page of this report. GAO staff members who made key 

contributions to this report are listed in appendix III. 

Debra A. Draper

Director, Health Care
Appendix I: UnitedHealth’s Education and 

Outreach Efforts during Transition and the 

First 6 Months of Health Care Delivery

Page 30 GAO-14-505 TRICARE Contractor Transition

UnitedHealth began its transition to become the West region’s managed 

care support contractor on July 3, 2012, with health care delivery starting 

on April 1, 2013. As part of its contract, UnitedHealth is required to 

conduct outreach and hold briefings for beneficiaries at various military 

sites throughout its region and develop a provider education program that 

is designed to enhance providers’ awareness of TRICARE. In addition, all 

materials used to educate beneficiaries and providers on TRICARE must 

be approved by the Department of Defense.

In February 2013, UnitedHealth began providing briefings to beneficiaries 

about various aspects of TRICARE, including health coverage information 

related to retirement, dependents, and deployment. (See table 2 for 

briefings conducted through the first 6 months of health care delivery.) In 

addition, UnitedHealth distributed welcome packages to all beneficiary 

households in the region, which included a welcome letter and a brochure 

produced by the TRICARE Management Activity.

Table 2: Number of Beneficiary Briefings and Attendees from February 2013 

through September 2013

Month Number of briefings Number of attendees a

February 89 b 5,676

March 344 20,207

April 505 23,255

May 520 22,895

June 508 23,693

July 490 22,919

August 548 44,235

September 547 32,598

Total 3,551 c 195,478

Source: GAO analysis of documentation from UnitedHealth. | GAO-14-505

a

The information at these briefings varied, including information about retirement, family members’ 

use of TRICARE, and deployment.

b

According to UnitedHealth officials, they began briefing beneficiaries on February 16, 2013, ahead of 

the scheduled April 1, 2013, departure of the outgoing contractor.

c

The type of education that UnitedHealth offered to providers depended on 

whether the provider was new to UnitedHealth. Providers new to 

UnitedHealth received a general orientation about both TRICARE and 

UnitedHealth. Existing UnitedHealth providers received an orientation that 

included similar materials, but was premised on the providers’ familiarity 

This reflects the total number of beneficiary briefings and attendees from February 19, 2013, through 

September 30, 2013, the first 6 months of health care delivery.

Appendix I: UnitedHealth’s Education and 

Outreach Efforts during Transition and the 

First 6 Months of Health Care Delivery
Appendix I: UnitedHealth’s Education and 

Outreach Efforts during Transition and the 

First 6 Months of Health Care Delivery

Page 31 GAO-14-505 TRICARE Contractor Transition

with UnitedHealth and its network programs and tools. In addition, 

UnitedHealth officials began conducting briefings to educate providers 

about TRICARE in February 2013. (See table 3 for briefings conducted

through the first 6 months of health care delivery.)

Table 3: Number of Provider Briefings and Attendees from February 2013 through 

September 2013

Month Number of briefings Number of attendees a

February 11 b 202

March 90 7,654

April 81 8,228

May 55 4,470

June 65 2,490

July 79 6,274

August 78 879

September 96 4,855

Total 555 c 35,052

Source: GAO analysis of documentation from UnitedHealth. | GAO-14-505

a

These briefings were held as webinars or town hall meetings with providers.

b

According to UnitedHealth officials, the provider briefings began on February 1, 2013, which is when 

the provider materials from the West region’s TRICARE Regional Office became available.

c

This reflects the total number of provider briefings and attendees from February 1, 2013, through 

September 30, 2013, the first 6 months of health care delivery.
Appendix II: Comments from the Department 

of Defense

Page 32 GAO-14-505 TRICARE Contractor Transition

Appendix II: Comments from the Department 

of Defense
Appendix II: Comments from the Department 

of Defense

Page 33 GAO-14-505 TRICARE Contractor Transition
Appendix II: Comments from the Department 

of Defense

Page 34 GAO-14-505 TRICARE Contractor Transition
Appendix II: Comments from the Department 

of Defense

Page 35 GAO-14-505 TRICARE Contractor Transition
Appendix II: Comments from the Department 

of Defense

Page 36 GAO-14-505 TRICARE Contractor Transition
Appendix II: Comments from the Department 

of Defense

Page 37 GAO-14-505 TRICARE Contractor Transition
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 38 GAO-14-505 TRICARE Contractor Transition

Debra Draper, (202) 512-7114 or draperd@gao.gov

In addition to the contact named above, Bonnie Anderson, Assistant 

Director; Danielle Bernstein; Jacquelyn Hamilton; Jeffrey Mayhew; 

Laurie Pachter; and Bill Woods made key contributions to this report.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(291157)
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